World largest oil company praises co-op with China

BEIJING, Nov. 10 (Chinese media) -- Saudi Arabia's leading

oil firm is looking to step up supplies to and cooperation with China in

anticipation of an emergence from the global economic slowdown, Abdallah S.

Jum'ah, president of Saudi Arabian Oil Company, or Saudi Aramco, said on Monday

in Beijing.

He saw the economic slowdown in China as short-term,

and was focused continuous cooperation in the long haul.

"We think China is one of the biggest growth markets

of oil in the world," said Jum'ah, also chief executive officer of Saudi Aramco,

which manages the world's largest proven oil reserves and is the world's largest

producer of crude oil.

"The oil business is a long-term business. The

current economic situation may contribute to the demand reduction. This is

experience we have gone through before, and we can weather it this time. We

expect demand to come down, but that is not making us panicky or very unhappy.

It's the nature of business," he told Chinese media.

"We're very happy with the cooperation, and we're

very happy with all the deals that we have done with our friends in China. The

deals are beneficial for both parties."

The cooperation mainly embraces direct oil supply to

and joint ventures in China, China's corporate presence in gas exploration in

Saudi Arabia and Chinese engineering contracts for Saudi Arabia.

According to China's General Administration of

Customs, the nation became a net oil importer in 1993 and relies on imports to

meet around 46.5 percent of its total demand of 346 million tones a year.

Since Saudi Aramco began to supply crude oil to China

in 1990, it has become the biggest oil supplier to China, Abdallah Jum'ah said.

In 2006, the company signed a memorandum of

understanding with Sinopec, China's largest oil refiner. Under the accord, China

will increase its imports from the Saudi producer up to 1 million barrels a day

(50 million tonnes a year) by 2010.

"We're supplying China with around 750,000 barrels

per day," said Jum'ah. Beyond 2010, his company would continue to supply China

with its requirements. "2010 is not a time for the memorandum to come to an

end," he added. He reckoned it would supply 1 million barrels a day thereafter.

The Saudi company also established, with Exxon Mobile

as partner, with Sinopec in June 2007 a joint-venture oil refinery and

petrochemical complex project in the eastern province of Fujian.

"We are very happy with the outcome, and we're

looking forward to the upgrade of the refinery and completion of the

construction of the petrochemical complex in the first quarter of 2009," he

said.

His company was talking with a Sinopec subsidiary

about another joint-venture refinery project in Qingdao, a coastal city in the

eastern province of Shandong, with agreement yet to be reached.

In terms of cooperation in Saudi Arabia, Jum'ah said,

"Sinopec is our partner now in a gas exploration project in Saudi Arabia. The

oil exploration in Saudi Arabia is restricted to Saudi Aramco."

He said many Chinese companies were helping his

company in construction, information technology and drilling.

The projects that would enable the company to produce

12 million barrels a day by the end of 2009 would not be affected by the

economic slowdown.

Even though the demand is going to be lower, the

company always kept 1.5million to 2 million barrels per day of extra capacity as

a cushion, so as to maintain the stability of the world oil market in accordance

with Saudi government policy, said Jum'ah.

"With the slowing demand in the short term, we may

have 3 million barrels of additional capacity at the end of 2009." His company

was confident that demand would pick up, and it would be keeping the cushion, so

that the world would not see any economic upheavals caused by instability in oil

supplies, he added.

In early November, Saudi Aramco announced the

refinery that it would develop on the west coast of Saudi Arabia was to be

postponed by some months. Jum'ah said the delay was in anticipation of a

slowdown in the engineering, purchase and construction markets when competition

with other projects would diminish. "Maybe it's better financially for us to

wait for a few months," he said.

He dismissed concerns over oil prices which have

fallen about 60 percent from the peak of 130 to 140 U.S. dollars a barrel in

July, saying the sustainability and stability of the market were more important.

"There was no reason for the oil price to reach 130 to 140 U.S. dollars because

there was no shortage of oil at that time. The market was well supplied, and our

customers were not requesting more oil."

At the end of October, OPEC slashed daily crude oil

production by 1.5 million barrels so as to stabilize the falling oil price.

Jum'ah said Saudi Arabia would cut output in line with one third of the OPEC oil

reduction requirement, that was to say 500,000 barrels a day.